Bailout Isn't Enough to Change How We Got Here in the First Place

We all must continue to work to ensure that Congress passes a bill containing key components to address the root causes of the crisis and protect America's homeowners. 

We still need a bill, but we need the right bill.

Here are some talking points that were prepared by the National Community Reinvestment Coalition:

Highlights of theEmergency Economic Stabilization Act of 2008

America is struggling with the worst financial system crisis since the Great Depression. Immediate action is essential to stabilize the markets and the US economy. Unfortunately, The Emergency Economic Recovery Act of 2008, currently being debated in Congress, will not achieve those goals. The bill directly and meaningfully addresses financial liquidity but fails to seriously address the core problem underlying the current financial crisis: massive home foreclosures. The bill does not mandate foreclosure prevention, and as a result leaves open the prospects for further significant economic disruptions and future emergency federal bailouts. The bill also inadequately protects taxpayer investments in the financial system bailout.

The following points describe the ways in which the bill falls short of resolving the current crisis or even meeting appropriate oversight standards it purports to achieve.

No meaningful loan modification mandate
Federal agencies are required only to encourage, but not to mandate modifications of loans purchased by the federal government. The bill lacks a mechanism to systematically modify loans held in securitized pools. The bill does not provide guidance as to what loan modifications may be reasonable and desirable. The bill does not address accounting rules or the tax implications that might accompany loan modifications. The bill does not address challenges presented with second mortgages.

Uncertain valuation approach by Treasury Department
Treasury is given the latitude to determine the final purchase price of problem assets from financial institutions. No current valuation exists to determine the price of these problem assets. If assets are purchased at full value as opposed to current market value, meaningful modifications will not be possible without unnecessarily incurring  significant taxpayer subsidies. No Congressional oversight is required to modify the Treasury Department’s approach to purchase failed assets.

No restrictions on financial assets purchased
According to the Congressional Budget Office, “the Secretary [of the Treasury] would have the authority, if deemed necessary to promote stability in the financial markets-to purchase any financial asset at any price and to sell that asset for any price at any future date. That lack of specificity…makes it impossible at this point to provide a meaningful estimate of the ultimate impact on the federal budget from enacting this legislation.”

No explicit loss protections for taxpayers
Treasury is to receive equity in the form of non-voting stock or senior debt from companies that participate in the program.  The bill does not define what an appropriate equity stake may be, how it would be structured or how it would work. If losses to taxpayers occur, the legislation requires Treasury to design a method to recapture those losses after five years. How, or whether, this measure will be enforced in five years remains uncertain.

No limits on executive compensation
The bill does not limit executive compensation. An institution that sells more than $300 million in assets to the Treasury would be subject to additional taxes, including a 20% excise tax on golden parachute payments triggered by events other than retirement, and tax deduction limits for compensation limits above $500,000. This means that an executive, for example who receives a $25 million golden parachute with a 20% excise tax would walk away with a $20 million bonus—paid for by the American taxpayer.

No anti-predatory lending provisions
The bill does not contain any provisions that purge unfair and deceptive lending practices from the mortgage market, leaving the door open to a future foreclosure crisis.

No bankruptcy help for homeowners; $700 billion for banks
The bill provides $700 billion in taxpayer money to fund bankruptcy avoidance for financial institutions. It fails to include a provision to protect homeowners that would cost the federal government not one cent. Current bankruptcy law prevents homeowners in financial trouble from pursuing loan modifications and resuming loan payments as part of bank restructuring. In contrast, wealthy consumers can seek modifications of loans for their second homes, investment properties, family yachts and other non-essential items.

The vote presents an opportunity to continue to impact on the content of the legislation and ensure that a stronger bill moves forward.

Tell Congress it's time to get it right.  Click below to Write your Congressional Representative now:

http://salsa.democracyinaction.org/o/2249/t/7989/campaign.jsp?campaign_KEY=25965

In addition to the advocacy points list above check out this story in the San Diego Union-Tribune that describes all the add-ons and earmarks that have nothing to do with the current crisis.

Comments

[Bob Jones]

How we got here in the First place.Recognize who actually started this mess:
Congress Encouraged Irresponsibility
By Jack Ward
Throughout our lives we are reminded to act responsibly. Our parents, neighbors, teachers, employers etc all have extolled the virtues of responsibility. But all this wisdom was washed down the drain by politicians.
In the dark days of the Carter Administration, congress passed The Community Reinvestment Act (CRA). The CRA essentially reduced the requirements to buy houses. But in 1995 under the Clinton Administration, the CRA lending standards were lowered even further. The Boston Federal Reserve produced a manual for mortgage lenders that said: "discrimination may be observed when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants." Lenders were told credit history, proof of income, and source of down payment were outdated criteria. Would you loan someone a significant amount of money without some assurance of repayment?
The intimidation did not stop there. The Fed warned the banks that "...Failure to comply with the Equal Credit Opportunity Act or Regulation B can subject a financial institution to civil liability for actual and punitive damages in individual or class actions." There was no question that the lenders were threatened with charges of violating the CRA if they didn't make home loans to people with poor credit ratings. Community activist groups like ACORN patrolled the lenders to make sure that unqualified buyers could get loans. When Obama was a lawyer/community activist he represented ACORN and sued Fannie Mae to reduce the requirements for getting mortgages. So the lenders complied and loaned to high risk buyers. As any banker will tell you, your credit rating determines your interest rate. So these high risk buyers wound up with adjustable rate mortgages (ARMs).
To insure that these lenders were not stuck with all these bad loans, lenders could sell these loans to the Federal National Mortgage Association (Fannie Mae) and The Federal Home Loan Mortgage Corporation (Freddie Mac), both are publicly owned government sponsored enterprise (GSE). The department of Housing and Urban Development (HUD) urged Freddie and Fanny to buy more loans. Freddie and Fannie were encouraging lenders to make more home loans. Developers, builders, real estate agents, appraisers, loan officers and lenders were eager to comply, after all everybody was making money.
As the sub-prime market increased, investment banks also wanted in on this money making machine and bought Mortgage Backed Securities (MBS). The (MBS) came with implied government guarantees - so what was the risk? The buyer didn't care because they were getting a house. The lenders didn't care because they were going to sell to Freddie and Fannie. Freddie and Fannie didn't care because they were going to sell to investment banks. And the investment banks didn't care because they thought the loans were backed by the government. All went well until the housing market stumbled, the interest on the ARMs increased, and the house of cards collapsed.
But the threat was not unknown. While president, Bill Clinton realized that Freddie and Fannie were out of control - but the Democrats in congress blocked action. Every year since he took office, including 17 times in 2008, President Bush echoed Bill Clinton's warnings on Freddie and Fannie. But congress ignored Bush like they did Clinton.
Why did congress ignore the warning from both President Clinton and President Bush? The answer is simple - MONEY. Freddie and Fannie acted like a piggy bank for politicians. Some of the same politicians that caused this financial crisis are advisors/supporters to Barack Obama and control both the House and Senate committees. In 2005 the Democrats blocked legislation that would have prevented this crisis. But Speaker of the House Nancy Pelosi said, "This came out of nowhere, this is all about the Republicans. We had nothing to do with this." Pelosi should talk to fellow Democrats Franklin Raines, Jim Johnson, Barney Frank, Chris Dodd, Maxine Waters, Charles Schumer and Jamie Gorelick who are just a few of the Democrat politios that raked in millions in this scam while encouraging irresponsibility.
Roots of rotten mortgages
By Ralph R. Reiland
Monday, September 29, 2008
The roots of today's mortgage-based financial crisis can be traced back to the Community Reinvestment Act (CRA), which Jimmy Carter signed in 1977. Seeking to address complaints from anti-poverty activists and housing advocates about banks allegedly discriminating against minority borrowers and "redlining" inner-city neighborhoods, the CRA decreed that banks had "an affirmative obligation" to meet the credit needs of victims of discrimination in borrowing.
To add a government stick to the process, the CRA decreed that federal banking regulators would consider how well banks were doing in meeting the goal of more multiculturalism in loaning when considering requests by banks to open new branches or to merge.
A good "CRA rating" was earned by way of increasing loans in poor neighborhoods. Conversely, lenders with low ratings could be fined.
The Fed, for instance, warned banks that failure to comply with government guidelines regarding the delivery of "equal credit" could subject them to "civil liability for actual or punitive damages in individual or class actions, with liability for punitive damages being as much as $10,000 in individual actions and the lesser of $500,000 or 1 percent of the creditor's net worth in class actions."
However well-intentioned in terms of delivering "economic justice," this push for more government-directed social engineering produced a widespread weakening of long-established industry standards for credit worthiness.
Led by Congressional Democrats, this policy of replacing private and decentralized decision-making with a system of centrally-delivered rewards and punishments was basically a one-party effort. Republicans, it seems, were more aware of the unintended consequences that flow from government interference in the market.
As Investor's Business Daily recently put it, succinctly and correctly: "Over the past 30 years, Democrats, along with a handful of Republicans, have demonized lenders as racist and passed regulation after regulation pressuring them to make more loans to unqualified borrowers in the name of diversity."
The march toward the eventual financial meltdown picked up speed during the Clinton administration via an increased lowering of loan standards in order to expand minority borrowing.
The result was widely praised. "It's one of the hidden success stories of the Clinton era," wrote Ronald Brownstein in May 1999 in the Los Angeles Times. "In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African-Americans owning their own homes is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites."
In 2000, Howard Husock reported in City Journal that the "Clinton Treasury Department's 1995 regulations made getting a satisfactory CRA rating much harder. There would be no more A's for effort. Only results -- specific loans, specific levels of service -- would count."
The "specific levels of service" referred to how well banks were responding to complaints, including complaints from advocacy groups that were in the business of complaining.
"By intervening -- even just threatening to intervene -- in the CRA review process, left-wing nonprofit groups have been able to gain control over eye-popping pools of bank capital, which they in turn parcel out to individual low-income mortgage seekers," reported Husock. "A radical group called ACORN Housing has a $760 million commitment from The Bank of New York."
In addition to setting the stage for giving money for mortgage payouts to ACORN and other lending amateurs, CRA authorized those organizations to collect fees from the banks for their "marketing" of loans.
"The Senate Banking Committee has estimated that, as a result of CRA, $9.5 billion so far has gone to pay for services and salaries of the nonprofit groups involved," reported Husock.
There's big money, in short, in "nonprofit" activism -- and upward mobility. A guy carries a sign advocating "Change" in front of a bank and the government turns him into a salaried protester, credit analyst and dispenser of mortgage money.
"The changes came as radical 'housing rights' groups led by ACORN lobbied for such loans," reports Investor's Business Daily, regarding the Clinton era. "ACORN at the time was represented by a young public-interest lawyer in Chicago by the name of Barack Obama."
Congress Encouraged Risky Home Lending
We are all talking about subprime loans and the havoc they've wreaked on the economy, but no one is talking about why banks give out these loans -- they are required to by law. Since the Community Reinvestment Act of 1977, Congress requires banks to offer loans to minorities in low-income areas, even if the clients can't make down payments, don't have good credit histories, or even employment histories !!!!!!
While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was Clinton who supercharged the process. After entering office in 1993, he extensively rewrote Fannie's and Freddie's rules.
In so doing, he turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocs and handed favors, jobs and money to political allies. This potent mix led inevitably to corruption and the Fannie-Freddie collapse.
Community Reinvestment Act. When Clinton modified the act in 1995, it became an even larger cause of this current financial disaster, and it wasn't such a great idea even when it was first signed by another Democrat President, Jimmy Carter, in 1977
Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended. Today's mortgage crisis was directly caused by federal government interference. The worst was the stick of the Community Reinvestment Act rules which, since 1995, have marginalized the credit checking of applicants as "discriminatory." On top of that, the carrot of Freddie and Fannie's "guaranteed" money led to an inevitable crash.
Congress REQUIRED banks to lower their credit standards and give out loans to those who didn't qualify otherwise:
Since these clients are high-credit risks, the only loans lenders can offer are high-interest loans that don't require a down payment or good credit history. These loans frequently default.
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The Truth!!!
• In 2003, Barnie Frank and the Democrats opposed the Bush administration efforts for the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis. Under the proposed plan a new agency would have been created within Treasury Department that would assume supervision of Fannie Mae and Freddie Mac, the government sponsored companies that were the two largest players in the mortgage industry. Frank said; “These two entities and not facing an kind of financial crisis”---he added “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing”
• $66 Billion was stolen from the American taxpayers and given to the crooks who were running the federal entitled Fannie Mae and Freddie Mac (F&F) and the others. F&F were telling the big banks that they had to lend money to people with bad credit
• 2005: Allen Greenspan (head of the Federal Reserve) said that Freddie and Fannie (F&F) were in a crisis and something must be done. John McCain sponsored a bill to take action. The bill was filibustered by the Democrats. ALL OF THE DEMOCRATS voted against trying to fix F&F and all of the Republicans voted in favor of trying to fix it. Senator Charles Shummer D-NY said F&F were doing a good job.
• Franklin D. Raines (President Bill Clinton's former economic adviser, current economic advisor to Obama, former CEO of Freddie Mac and currently facing a criminal investigation) made least $90 million from Freddie Mac (and the Obama supporters now seem to be worried about excessive Executive compensation! Ha…Crooks!)
• Jamie Gorelick (Former Clinton administration official Vice Chairman Fannie Mae) (Although Gorelick had no background in finance, she joined Fannie Mae in 1997 as vice chair and departed in 2003. For her trouble, Gorelick collected a staggering $26.4 million in total compensation, including bonuses. Federal investigators would later say that "Fannie Mae's management directed employees to manipulate accounting and earnings to trigger maximum bonuses for senior executives from 1998 to 2003." The New York Times would call the manipulations an "$11 billion accounting scandal.")
• Jim Johnson (Former Chairman of Fannie Mae and an Obama advisor) Johnson earned nearly $21 million from Fannie Mae in 1998.
• Top Recipients of Fannie Mae and Freddie Mac Campaign Contributions, 1989-2008 Obama $105,849.00
Obama and ACORN-- What does the candidate of Hope and Change — the candidate of Reform and New Politics have to do with ACORN?
• Obama has had an intimate and long-term association with the Association of Community Organizations for Reform Now (Acorn) (Obama is a member of Acorn’s National Association Board) Acorn is at least as radical as these better-known groups, arguably more so. Yet because Acorn works locally, in carefully selected urban areas, its national profile is lower. Acorn likes it that way. And so does Barack Obama.
• While Obama’s Acorn connection has not gone entirely unreported, its depth, extent, and significance have been poorly understood. Typically, media background pieces note that, on behalf of Acorn, Obama and a team of Chicago attorneys won a 1995 suit forcing the state of Illinois to implement the federal “motor-voter” bill. In fact, Obama’s Acorn connection is far more extensive. In the few stories where Obama’s role as an Acorn “leadership trainer” is noted, or his seats on the boards of foundations that may have supported Acorn are discussed, there is little follow-up. Even these more extensive reports miss many aspects of Obama’s ties to Acorn.
• Obama was ACORN’s attorney in his early days Barack Obama trained ACORN management and its members on voter registration and community “organizing.
• While Chairman of the Chicago Annenberg Challenge (CAC)—where he served with Weather Underground terrorist William Ayers—Obama arranged for CAC funding to ACORN.
• This is the same ACORN that is currently practicing voter fraud for Obama’s election to the presidency of the United States of America.
• In Florida, ACORN has already registered 380,000 “new voters.” However, many if not all of these are under suspicion. In New Mexico’s Bernalillo County alone, well over 1,000 ACORN-registered “voters” are under suspicion and federal law enforcement has been called in to investigate.
• In Ohio’s Franklin County, ACORN has been caught presenting falsified voter registration cards. This goes on and on throughout multiple states. Can you say----- clear and present danger?
• Acorn, one of America's most militant left-wing "community activist groups," is spending $16 million this year to register Democrats to vote in November. In the past several years, Acorn's voter registration programs have come under investigation in Ohio, Colorado, Michigan, Missouri and Washington, while several of their employees have been convicted of voter fraud
• ...Acorn has promoted laws like the Community Reinvestment Act, which laid the foundation for the house of cards built out of subprime loans.
• The housing bill passed by Congress in July also included a tax on Fannie Mae and Freddie Mac to raise an estimated $600 million annually in grants for lobbying groups such as ACORN
• Last July, ACORN settled the largest case of voter fraud in the history of Washington State. Seven ACORN workers had submitted nearly 2,000 bogus voter-registration forms. According to case records, they flipped through phone books for names to use on the forms, including “Leon Spinks,” “Frekkie Magoal” and “Fruto Boy Crispila.” Three ACORN election hoaxers pleaded guilty in October. A King County prosecutor called ACORN’s criminal sabotage “an act of vandalism upon the voter rolls.” The group’s vandalism on electoral integrity is systemic. ACORN has been implicated in similar voter-fraud schemes in Missouri, Ohio, and at least 12 other states. The Wall Street Journal noted: “In Ohio in 2004, a worker for one affiliate was given crack cocaine in exchange for fraudulent registrations that included underage voters, dead voters and pillars of the community named Mary Poppins, Dick Tracy and Jive Turkey. During a congressional hearing in Ohio in the aftermath of the 2004 election, officials from several counties in the state explained ACORN’s practice of dumping thousands of registration forms in their lap on the submission deadline, even though the forms had been collected months earlier.”

The YouTube links will take you to very interesting and informative videos. Please check and verify the information…..but they appear accurate.
1.
Democrats Covering up the Fannie Mae, Freddie Mac and Economic Crisis
Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis.

At a 2004 hearing see Democrat after Democrat covering up and attacking the regulations to protect Fannie Mae and Freddie Mac (their Cash Cows) that are now destroying our economy because the Democrats let them cheat.
2.

Barack Obama & Friends Caused U.S. Economic Crisis
In a special report Barack Obama's close ties to Countrywide, Fannie Mae, and Freddie Mac and many key democrats such as Chris Dodd Barney Frank and John Kerry have helped cause the current U.S. Economic Crisis, and noted is the Advisory positions Scandel Riden Jim Johnson, and Franklin Raines have with The Obama Campaign. Confirm for yourself the Contributions made By Freddie Mac & Fannie Mae to Obama and others here: http://www.opensecrets.org/
3.

Burning Down The House: What Caused Our Economic Crisis?
Like rats to the grainery, the bozo's which helped create this mess are now going to *fix* the mess.